Expenditure, income variability and heterogeneity: Evidence from Italian household data

The paper provides estimates of the elasticity of expenditure relative to income for Italy, using a quasi-panel dataset from the Italian Household Budget Survey (AD-HBS) between 2018 and 2022. Specifically, we estimate the Expenditure–Income Elasticity (EIE) using quantile regression methods at different points of the income distribution and with different characteristics of the population (working and marital status, type of income — labour, pensions and transfers —, demographic characteristics, geographical location etc.) and type of goods (durables, nondurables and services). We observe significant heterogeneity in the EIE distribution, which is strictly decreasing across quantiles and persistent across time, with an extraordinary reduction in 2020 due to the pandemic outbreak. The analysis highlights the importance of accounting for household heterogeneity when assessing the distributional effects of income changes.